Imported Pickups Inch Closer with the Trans-Pacific Partnership

Clifford Atiyeh

Oct 7, 2015

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Perhaps President Obama is a secret Volkswagen Amarok fan. Proof? His signature on a trade pact with 11 countries could lower the barriers to foreign-made pickup trucks and vans on our soil for the first time in more than 50 years.

After six years of negotiation, the Trans-Pacific Partnership (TPP) is now up for approval by Congress and the various legislative bodies of Canada, Mexico, Australia, New Zealand, Japan, Vietnam, Singapore, Malaysia, Brunei, Chile, and Peru. The full treaty text hasn’t been released, but the basics are trickling out: The U.S. is set to end the chicken tax, a 25-percent import tariff on foreign-made pickups and vans in place since 1963, and will phase out the standard 2.5-percent tariff for every other foreign car. At a glacial pace, that is.

Beyond the detractors—and there are many, including the United Auto Workers and Ford—who say the TPP does not address currency manipulation that can make foreign cars cheaper to sell in the U.S., the treaty requires immense patience. Tariffs would remain for at least 20 years—25 years for Japanese cars and 30 years for Japanese trucks—and begin to reduce only toward the end of those years. In addition, the TPP may undermine the North American Free Trade Agreement’s domestic-parts content rule, which determines if a vehicle produced in the region can be sold to other countries in that region without tariffs. Currently, NAFTA considers a car duty-free if 62.5 percent of its parts are sourced within the region, but the TPP may drop that to between 45 and 55 percent, which could lessen incentives for automakers to build cars within the U.S., Mexico, and Canada.

U.S. automakers are also anticipating the treaty’s specific enforcement against Japan, which has been accused for years of so-called non-tariff barriers that make it difficult to sell American cars in a fiercely domestic market. (American automakers are lucky if they move a couple thousand cars apiece there each year.) Automaker lobbies have called out Japan’s unfavorable taxation on U.S. cars, the blocking of importers from selling U.S. cars to existing Japanese dealers, and lengthy, expensive federalization processes not levied on domestic cars. According to the Office of the U.S. Trade Representative, the TPP would offer “dispute settlement” with Japan that would immediately rollback or delay U.S. auto and truck tariffs, “head off any new non-tariff measures,” and prevent “import surges.” The U.S. struck a similar deal with Korea in 2011, which had retained a highly insular car market that was effectively closed to foreign competition.

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The TPP also has nothing to do with the Transatlantic Trade and Investment Partnership, a similar ongoing trade negotiation since 2013 with the 28-nation European Union. Unlike that agreement, the TPP has been negotiated in secret without working documents available to the public. In short, we won’t know what’s included unless Congress approves the final version. Without two effective treaties covering all major markets, the ratio of imported trucks could be unfairly split between Asian and European countries—or production of those vehicles could start shifting to countries under the TPP.

For now, it’s too early to tell what economic effects such a treaty might bring if it becomes law—and it’s certainly still presumptuous to expect an influx of overseas trucks anytime within the next two decades. Best to stave your passion for Rangers, Amaroks, and Tritons for a good long time.